As more colleges are reportedly increasing tuition costs, students are finding they need to borrow in order to supplement financial aid, but when it comes to the types of loans that students are using, but many feel that federal college loans which are used to pay student tuition offer more repayment options after graduation and can be more affordable in certain cases. Typically, a federal student loan comes with a lower interest rate and can be available even for bad credit borrower in need of student loans, but private loans for financial aid are still an option which students can explore, yet counselors often suggest students look beyond graduation before making a decision as to what type of loans will be helpful.
New students who may acquire a private student loan can get an affordable interest rate, but there are variables that may be factored in as some students who, again, may have a low credit score, could be required to provide a cosigner, but those directly out of high school that may have little or no credit history may, again, find affordability in these options. However, one of the main reasons that federal college loans are typically used by students is the fact that they are not only affordable but can come with more repayment options.
Students who are in need of a high amount of student loans will need to prepare for repayment after graduation, but there are methods that can be used by these individuals to lower costs if meeting the repayment obligation on federal student loan debt is too problematic. Obviously, there is also an attraction to federal student loans because of programs like the Public Service Forgiveness option, which will allow for certain students to have their student loan debt forgiven after 10 years of repayment.
Also, there are programs that can not only lower a monthly payment requirement for individuals that qualify for public service forgiveness, but students who are on a traditional repayment plan as well. Graduates can use federal student loan consolidations as a way to gain a more affordable monthly payment, which is usually associated with a low interest consolidation loan on federal student loans when multiple debt obligations are in place. While many financial aid counselors caution against using consolidations due to the fact that it can cause overall costs to increase, there are also income-based repayment programs that will help students erase their debt at a more affordable monthly rate as well.
Some students can get on a IBR plan that will only require a monthly payment, which will be capped at an amount that is affordable based on a particular borrower’s income. Understandably, options for these more affordable repayment plans have led many students to choose federal loans as a way of meeting costs that remain even after scholarship and grant funds have been applied. However, students must explore all of their opportunities for financial aid, which means exhausting scholarship and grant aid in the hopes of avoiding loans, and also comparing private and federal loans to see whether a particular individual’s situation will make one of these options more affordable than the other. While finding scholarships and grants can lower the amount that a student must borrow, and decrease debt that is present upon graduation, there are these opportunities for students to gain more affordability in their monthly repayment plans after graduation if it is necessary, and counselors often suggest students should weigh these options before selecting the types of loans they will use.